need help with this HW. all 3 pictures are the same problem

1. [-/10 Points) DETAILS MY NOTES ASKYC Question 1: Cost allocation Product A Product B Total sales volume (units) 270 150 420 Revenue $3,000 $18,000 $21,000 Variable costs: direct materials $600 $1,200 $1,800 direct labor $1,200 $3,000 $4,200 Contribution margin $1,200 $13,800 $15,000 Fixed costs $12,600 Profit $2,400 a) Allocate the fixed costs between products A and B. Use direct labor dollars as the cost driver. allocation rates per DLS allocated costs for A-$ allocated costs for B-$ b) Compute the profit margins for products A and B: profit margin for As profit margin for B- Enter negative numbers with a minus sign, le, a loss of $1,000 should be entered as -1000, not as (1000) or ($1000). c) Should you drop product A or product B in the short term? Why? Keep both products - both have positive contribution margin Drop product A -- it has negative profit margin Drop product A - it has negative contribution margin Drop product A It has smaller contribution margin than product B new homework.ACCT 2002, section 01, 2020 bin Should you drop product A or products in the long term? Why? keep both products - both have positive contribution margin Drop product A-t has negative profit margin Drop product A - it has negative contribution margin Drop product it has smaller contribution margin than products d) If you drop product A in the short term, fed costs will remain the same decrease by $3.500 profit will decrease by $1,200 Increase by 2.400 If you drop product A in the long term, feed costs will remain the same decrease by $3,600 profit will decrease by $1,200 Increase by $2,400 e) Allocate the fixed costs between products A and B, using the number of units as the cost driver. allocation rates per unit located costs for As allocated costs for Bes These allocated amounts are very different from what you got in part (a). In general, should we use the allocated costs from part (a) or from part (e)? Why? use the allocated costs from () -- direct laboris always a better cost driver than the number of units use the allocated costs from (e) the number of units is always a better cost driver than direct labor It depends -- direct labor can be a better cost driver in some situations, and the number of units for some other activity measure) can be a better cast river in other stations 1) Suppose that a firm uses a labor-intensive production process. The most reasonable cost driver for manufacturing overhead costs ist number of units machine hours direct labor (measured in hours or dollars) Suppose that a firm uses a machine-intensive production process. The most reasonable cost driver for manufacturing overhead costs number of units 22 ctv MacBook Air $ 4 2 3 % 5 & 7 8 9 O W E R T Y PE cone w homework - ACC 2102, section DDR, Fal 2020 Websign Suppose that a firm uses a machine-Intensive production process. The most reasonable cost driver for manufacturing overhead costs ist number of units machine hours direct labor (measured in hours or dollars) 9) Suppose that a firm uses a machine intensive process to make the components for the finished product and then uses laborIntensive process to assemble the finished product The firm wants to implement a refined cost allocation with two cost pools: Pool 1: overhead costs related to the production of components (-9. machine depreciation, rent for the factory building used to make the components, salaries of machine maintenance stat) Pool 2: overhead costs related to the assembly of the finished product(e.g. depreciation on tools used by assembly workers, rent for the factory building used for assembly, salaries of labor supervisors) The most reasonable cost drivers for the two pools are: direct labor hours or dollars for both pools machine-hours for pool 1 and direct labor hours or dollars for pool 2 number of units for pool 1 and number of workers for pool 2 machine hours for both pools PM Submit Ans